Save Money on Your Car.
Welcome to another Financial Tip Friday! Today we will be discussing how to manage one of the more costly and troublesome expenses in your budget. I’m talking of course about your car. Unless you rely on public transit or other alternative forms of transportation like a bicycle, maintaining you automobile can be a sizable portion of your expenses. According an annual report on driving costs by AAA, a midsize sedan like a Toyota Camry can cost you on average over $760 a month, or $9,150 per year. Those costs include maintenance, gas, insurance costs, tires, registration and license fees, and depreciation. That’s a lot of expenses that can take a big chunk out of your wallet. If you have a bigger vehicle like an SUV then the cost goes up about $200 to $967 a month, or $11,600 a year.
Don’t Spend More Than Necessary
It can be hard to determine what kind of car is the right car for you when you’re car shopping. But it is important to consider your long term financial situation before you make such a large purchase like buying a car. According to the 2013“Your Driving Cost” report by AAA, the difference in cost per year between a small size sedan and a medium sized one is around $2,000 dollars a year. The difference between a midsize and a large sedan is around that range as well. When you add up the difference over a period of time, we’ll say 5 years, choosing a bigger car can cost you an extra $10,000. Choosing the wrong car can definitely add up, so make sure you do your homework and select the right car for you.
Stay Away From New Cars
Why not new cars? Because of depreciation. Depreciation is the biggest expense for owning a car, and it’s often overlooked. After the first year of ownership, the value of the car can depreciate up to 20%. According to Consumer Reports, depreciation accounts for about 48% of total ownership costs over 5 years. If you look to purchase used cars, you can circumvent some of the costs of depreciation. High-end car brands like Lexus, Mercedes, and BMW are really nice to drive, but in the first couple years of ownership they take a huge hit from depreciation (You can check out Edmunds True Cost to Own Tool to see depreciation and other costs for specific models).
Study Your Manual
You know that little rectangular book in your glove box that says owner’s manual? Well apparently it is very useful in keeping your car in good shape and preventing and extraneous repair expenses. I had to find this out the hard way with my old car, and long story short, I had to get rid of it. Your owner’s manual should have a section available that shows you when you should take in your car and what maintenance work you should have done.
Knowing what your car is supposed to get can help you avoid over or under maintenance and prevent dishonest mechanics from putting extra or unnecessary repair costs on you.
Look Into Insurance Costs.
You may want to ask your insurance company for a quote on your car before you purchase a new car. You may be surprised at what the rates may be. Depending on what type of car you choose, your rates could be much higher. Choosing a sporty car such as a Subaru Impreza WRX STI (my personal favorite) can cost much more than choosing a safer, less sporty option. Insurance can account for 10% of your car costs, and you’re going to need car insurance, so make sure you wont charged an arm and a leg cause you wanted a car that goes real fast.
Your car is one of the biggest investments that you make besides maybe the purchasing of a house. If you don’t take care of it, the costs can add up and that means more money taken out of your wallet for avoidable expenses. I would highly recommend taking a look at the AAA Your Driving Cost Report and Edmund’s True Cost to Own Tool (Both listed above). They can really help you get a more detailed look at your specific car’s needs and give you a ballpark estimation of your future driving costs.Until next time folks, be sure to drive safely.